Buy Back of Shares – Corporate and Management Accounting MCQBy CACSMockTest / November 25, 2022 0 Buy Back of Shares – Corporate and Management Accounting MCQ 1 / 32 The following information is available from the audited balance sheet of TH Ltd.: Equity Share Capital (3,000 lakh Shares of ₹ 10 each) 30,000 Securities Premium A/c 3,000 General Reserve 10,000 Secured Loanshttps: 40,000 Unsecured Loans 22,000Compute the maximum limit up to which buy-back is permitted in the financial year 2018-2019. (A) 800 lakh shares (B) 600 lakh shares (C) 500 lakh shares (D) 400 lakh shares 2 / 32 Following is the extract of the balance sheet of Tube Ltd. Equity Shares of ₹ 10 each20,00,000 Securities Premium 4,80,000 15,00,000 Reserves 5,60,000 Profit & Loss Account Bank 18,20,000 1The company bought back 30,000 shares at ₹ 40 each. The transaction in respect of buyback was financed by the sale of 2/3rd of non-trade investment for ₹ 11,80,000. 0008,40 Non-Trading Investments20 (A) ₹ 12,00,000 (B) ₹ 16,00,000 (C) ₹ 14,50,000 (D) ₹ 18,00,000 3 / 32 Following is the extract of the balance sheet of Light Co. Ltd.The company bought back 15,000 shares at ₹ 40 each. The transaction in respect of buy-back was financed by the sale of 2/3rd of non-trade investment for ₹ 5,90,000.Amount to be transferred to capital redemption reserve =? (A) ₹ 6,00,000 (B) ₹ 1,00,000 (C) ₹ 4,50,000 (D) ₹ 1,50,000 4 / 32 ABC Ltd. has paid-up equity capital of 10,00,000 equity shares of ₹ 10 each fully paid-up. The position of reserves is as follows:General Reserve = ₹ 30,00,000Profit & Loss Account = ₹ 2,00,000Securities Premium = ₹ 2,00,000The company decided to buy back 2,00,000 equity shares of ₹ 10 each at 25% premium. For this purpose, the company sold the entire investments at ₹ 12,00,000 (book value ₹ 10,00,000) and made a fresh issue of 10% preference shares of ₹ 100 each to the extent minimum after utilizing the securities premium account and half of the general reserve. How many preference shares must be issued by the company so that provisions of the Companies Act, 2013 get complied with? (A) 20,000 preference shares (B) 40,000 preference shares (C) 1,000 preference shares (D) 4,000 preference shares 5 / 32 Equity shares amounting to ₹ 2,00,000 are brought back at a premium of 5%, by the issue of preference shares amounting to ₹ 1,00,000 at a premium of 10%. The amount to be transferred to capital redemption reserve =? (A) ₹ 1,00,000 (B) ₹ 90,000 (C) ₹ 1,50,000 (D) ₹ 50,000 6 / 32 During the year 2018-2019, T Ltd. buy-back 20,000 equity shares of ₹ 100 each at a premium of 5%. During the year 2018-2019, as the company did not have sufficient cash resources to buy back equity shares, it issued ₹ 1,00,000, 12% Preference shares of ₹ 10 each at a premium of 15%. The company has sufficient balance in general reserve. At the time of buy-back equity shares, the amount to be transferred to capital redemption reserve =? (A) ₹ 10,00,000 (B) ₹ 9,50,000 (C) ₹ 12,00,000 (D) ₹ 15,00,000 7 / 32 S Ltd. decided to buy back 2,000 equity shares of ₹ 100 each at a premium of 10%. For the purpose of redemption, the company issued 15,0 10% Preference shares of ₹ 10 each at a premium of 20%. Company has sufficient balance in Profit & Loss A/c. At the time of buy-back shares, the amount to be transferred by the company to the Capital Redemption Reserve Account =? (A) ₹ 20,000 (B) ₹ 50,000 (C) ₹ 1,50,000 (D) ₹ 2,00,000 8 / 32 N Ltd. had 90,000 equity shares of ₹ 100 each, fully paid up. The company decided to buy back 10% shares at par by the issue of the sufficient number of preference shares. N Ltd. does not have any reserves.How many preference shares are required to be issued if new preference shares are to be issued at ₹ 10 each? (A) 9,00,000 shares (B) 90,000 shares (C) 1,00,000 shares (D) 1,20,000 shares 9 / 32 The Paid-up equity shares capital of ABC Ltd. is ₹ 50,00,000 having a face value of ₹ 10 each fully paid-up. Other details:General Reserve = ₹ 15,00,000General Reserve = ₹ 15,00,000Capital Redemption Reserve = ₹ 4,00,000Profit & Loss Account = ₹ 1,00,000Statutory reserve = ₹ 6,40,000Securities Premium = ₹ 1,00,000The Board of Directors passed a resolution in a Board meeting to buy back a maximum number of shares as allowed by law. Maximum No. of shares that can be brought back =? (A) 55,000 shares (B) 67,000 shares (C) 1,25,000 shares (D) 78,000 shares 10 / 32 Which of the following method of buy-back is allowed under the Companies Act, 2013?(I) Buy-back by way of purchasing the securities issued to employees of the company pursuant to a scheme of stock option.(II) Buy-back by way of purchasing the securities issued to employees of the company pursuant to a scheme of sweat equity. (A) (I) only (B) (II) only (C) Both (I) and (II) (D) Neither (I) nor (II) 11 / 32 Which of the following is allowed within the next 6 months after the buyback of share? (A) Stock option schemes (B) Sweats equity (C) Conversion of preference shares or debentures into equity shares (D) All of the above 12 / 32 Which of the following is allowed within the next 6 months after the buyback of share? (A) Bonus issue (B) Conversion of warrants (C) Stock option schemes (D) All of the above 13 / 32 Where a company completes a buyback of its shares or other specified securities, it shall not make a further issue of the same kind of shares or other securities including allotment of new shares u/s 62( 1 )(a) [i. e. right issue] or other specified securities within a period of – (A) 6 months (B) 1 year (C) 2 years (D) 10 months 14 / 32 Where a company buys back its own shares or other specified securities, it shall extinguish and physically destroy the shares or securities so bought back within the last date of completion of buy-back. (A) 3 days (B) 8 days (C) 7 days (D) 9 days 15 / 32 As per Section 68(6) of the Companies Act, 2013, declaration of solvency should be verified by an affidavit to the effect that the Board of Directors of the company has made a full inquiry into the affairs of the company as a result of which they have formed an opinion that it is capable of meeting its liabilities and will not be rendered insolvent within a period of_____from the date of the declaration adopted by the Board. (A) 6 months (B) 1 year (C) 2 years (D) 10 months 16 / 32 Declaration of solvency in relation to buyback of shares has to be filed in (A) Form SH-6 (B) Form SH-9 (C) Form SH-4 (D) Form SH-8 17 / 32 Where a company proposes to buy-back its own shares or other specified securities, it shall, before making such buy-back, file with the ROC and the SEBI, a declaration of solvency signed by – (A) at least 2 directors of the company, one of whom shall be the managing director. (B) at least 2 directors, managing director, and Chief Financial Officer, if any. (C) at least 2 directors of the company and Company Secretary, if any. (D) at least 3 directors of the company, one of whom shall be the managing director. 18 / 32 Which of the following method of the buyback is allowed under the Companies Act, 2013?(I) Buy-back from the existing shareholders or security holders on a proportionate basis.(II) Buy-back from the promoters of the company only on a selective basis.(Ill) Buy-back from the open market. (A) (I) only (B) (I) and (II) only (C) (I) and (III) only (D) (I), (II) and (Ed) 19 / 32 The notice of the meeting at which the special resolution is proposed to be passed relating to buy-back of shares shall be accompanied by an explanatory statement stating (A) Full and complete disclosure of all material facts (B) Analysis of debt-equity (C) Gross profit ratio before buy-back (D) Chairman’s view on buy-back 20 / 32 No offer of buy-back shall be made within a period of reckoned from the date of the closure of the preceding offer of buy-back (A) 6 months (B) 1 year (C) 2 years (D) 10 months 21 / 32 The buy-back of the shares or other specified securities listed on any recognized stock exchange is in accordance with the – (A) SEBI (Buy-Back of Securities) Regulations, 2018 (B) SEBI (Buy-Back of Securities) Regulations, 2014 (C) SEBI (Buy-Back of Securities) Regulations, 1992 (D) SEBI (Buy-Back of Securities) Regulations, 1994 22 / 32 Companies are allowed to buy back shares which are: (A) Partly paid-up (B) Fully paid-up (C) Partly paid-up or fully paid-up at the option of the company (D) Fully paid-up and partly paid-up with the permission of Central Government 23 / 32 For the purpose of calculating the debt-equity ratio which of the following debts are considered – (A) Secured debts (B) Unsecured debts (C) Current liabilities (D) All of the above 24 / 32 As per Section 68 of the Companies Act, 2013, the post-buy-back debt-equity ratio should not exceed – (A) 1 (B) 1.5 (C) 2 (D) 3 25 / 32 Buy-back of equity shares in any financial year should not exceed – (A) 10% of net worth (B) 25% of the aggregate of paid-up capital and free reserves of the company (C) 25% of the paid-up equity capital (D) 25% of the aggregate of paid-up equity capital and preference capital 26 / 32 For buy-back up to of the company, Board resolution is sufficient. (A) 10% of paid-up capital (B) 10% of free reserves (C) 10% of paid-up capital or free reserves (D) 10% of paid-up capital and free reserves 27 / 32 The maximum permissible buy-back under the Companies Act, 2013 is (A) 10% of paid-up capital with Board resolution. (B) 25% of paid-up capital with Board resolution. (C) 25% of the aggregate of paid-up capital and free reserves of the company with a special resolution of shareholders. (D) 25% of the aggregate of paid-up capital and free reserves of the company with an ordinary resolution of shareholders. 28 / 32 No company shall purchase its own shares or other specified securities unless buy-back is authorized by its – (A) Memorandum of Association (B) Registrar of Companies (C) Shareholders agreement (D) Article of Association 29 / 32 Provisions of Section 68 relating to buy-back of shares are applicable to – (A) Private companies (B) Public companies (C) Listed companies (D) All of the above 30 / 32 Section 68 of the Companies Act, 2013 provides that no buy-back of any kind of shares or other specified securities shall be made out of the (A) Securities premium balance as it stood before buy-back. (B) Proceeds of an earlier issue of the same kind of shares or same kind of other specified securities. (C) General reserve in excess of 15% balance as per latest audited balance sheet. (D) Proceeds of issue of specified securities. 31 / 32 A company may purchase its own shares or other specified securities out ofA. Free reservesB. Securities premium accountC. Proceeds of issue of any sharesD. Proceeds of issue of specified securities. (A) A and C only (B) A, B, and C only (C) A, C, and D only (D) A or B or C or D 32 / 32 Provisions relating to buying back securities are contained in the Companies Act, 2013. (A) Section 77 (B) Section 77A (C) Section 68 (D) Section 63 Your score is LinkedIn Facebook Twitter VKontakte Related